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Reducing Innovation Risk with a Diversified Approach


Innovation is like mountain climbing; it bears its own risks
Innovating is like mountain climbing

Corporate innovation is often seen as a double-edged sword, offering boundless opportunity but also a harbinger of substantial risk. Large corporations understandably fear failure when embarking on innovative endeavors, as the stakes are high, the market is constantly changing, and the consequences of missteps can be costly. However, it is important to remember that this fear is justified. History teaches us failed innovation attempts can cost market leaders their position, and business.


The key is not to eliminate this fear, but to use it as motivation for a thoughtful, diversified, and forward-thinking approach to innovation. One such approach is 'innovation diversification'.


Diversifying your innovation portfolio means spreading your efforts across various initiatives, each with its own time horizon and approach. It's like having a diversified investment portfolio; it minimizes risk and increases the likelihood of long-term success.

Let's delve into two key strategies for diversifying your innovation portfolios:


Horizon-Based Innovation

One effective way to diversify your innovation initiatives is by adopting a horizon-based approach. This means dividing your innovation projects into short-term, mid-term, and long-term horizons. Here's how it works:

  1. Short-term Innovations: These projects focus on immediate gains. They often involve incremental improvements to existing products or processes. While the impact may be smaller, short-term innovations provide quick wins and boost competitiveness.

  2. Mid-term Innovations: Mid-term initiatives strike a balance between immediate gains and long-term vision. They involve more substantial changes and may require moderate investments. These innovations help sustain growth and adapt to evolving market trends.

  3. Long-term Innovations: These are the visionary projects that aim to revolutionize your industry. They often involve high levels of uncertainty and require significant resources. Long-term innovations are about preparing for the future and staying ahead of the curve.

By diversifying across these horizons, you ensure that your innovation efforts cater to both short-term needs and long-term sustainability.


Partnerships and Acquisitions

Collaboration is another powerful way to diversify your innovation portfolio. Consider the following strategies:

  1. Startup Collaborations: Partnering with startups allows you to tap into external innovation expertise. Startups are agile, innovative, and often disruptors in their industries. Collaborative efforts can bring fresh ideas and solutions to your organization.

  2. Innovation Hubs: Joining or creating innovation hubs provides a structured environment for collaboration. These hubs bring together diverse talents and resources, fostering creativity and ideation.

  3. Acquisitions: In some cases, acquiring innovative companies can be a strategic move. It enables you to assimilate cutting-edge technologies, products, or talent into your organization swiftly.

  4. Investment: Investing in startups or venture capital funds can provide exposure to a wide range of innovative ideas. It's a way to diversify your innovation efforts while potentially benefiting from financial returns.

Practical Implementation

Diversifying your innovation portfolio requires strategic planning and alignment with your business objectives. Here are practical steps for implementation:

  1. Assessment: Begin by assessing your current innovation initiatives. Identify their horizons and assess their success rates.

  2. Strategy Alignment: Ensure that your innovation strategy aligns with your overall business strategy. Define clear objectives for each horizon and collaboration effort.

  3. Resource Allocation: Allocate resources based on the importance and risk associated with each initiative. Long-term innovations may require more substantial investments.

  4. Monitoring and Adaptation: Continuously monitor the progress of your innovation projects. Be prepared to adapt and reallocate resources as needed.

  5. Metrics and KPIs: Establish metrics and key performance indicators (KPIs) for each initiative. This will help you track their impact and success.

In conclusion, diversifying your innovation portfolios is a strategic imperative for C-level executives to reduce innovation risk. By embracing horizon-based innovation and exploring partnerships and acquisitions, you can manage risk effectively and drive sustainable growth. Remember that innovation is not a one-time effort but an ongoing journey that requires adaptability and a diversified approach.

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